Plan B for success

The initial situation was not an easy one. When JLL received the mandate for a non-performing portfolio in Northern Germany in 2015, the sale of the main portfolio on behalf of the insolvency administrator BBL Graf Brockdorff was completed quickly and successfully. Unfortunately, a negotiated deal for part of the portfolio (262 residential units) located in a redevelopment area in Lüneburg failed because the local council refused its consent. This consent was essential because of the property’s location within a redevelopment area. The local council were prepared to grant their consent upon the fulfilment of an urban planning contract which imposed certain obligations on the investor.

What now? There was a certain time pressure. Following the successful sale of the main portfolio, our client requested a prompt solution for the remaining portfolio; however, the local council's demands would not make the search for a willing investor easy. The challenge was to represent the interests of the insolvency administrator and the creditor in the best possible way and to find a satisfactory solution for all parties, given the objectives of the investor and the interventions of the local council.

All options taken into consideration - and optimally prepared.

JLL proposed a double strategy: firstly, attempts should be made to sell the remaining portfolio to an investor by means of a private sale, with a corresponding urban planning contract in place. At the same time, an application was made for a forced sale to obtain a change of ownership, where necessary without the consent of the local council.

In June 2018, our team began its preparations for a marketing process for a sale by private agreement. It was particularly important to communicate the intended sale to the local council at a very early stage, and to clarify as early as possible which requirements would be imposed on the investor. After shortlisting two bidders, we held the necessary talks with the local council as part of the due diligence process.

At the same time, JLL negotiated a bidding guarantee for the event of a forced sale. This assured the selling party that it would achieve a fixed minimum price and interested investors were guaranteed that, as the highest bidder, they would be able to acquire the portfolio securely at auction and would only have to pay the price specified in the bidding guarantee.

The JLL team in Hamburg managed the complex sale process in cooperation with their Frankfurt colleagues - a challenging task in terms of the various interests to be considered.

Plan B brings the solution.

Ultimately, the local council delayed a possible agreement with potential investors to the extent that, in February 2019, the insolvency administrator and creditor decided to take the well-prepared path of forced sale. The advantage was that the interested investors had already received all property information during the contract negotiations for the private sale. The dual strategy recommended by JLL paid off. In June 2019, the Lüneburg portfolio was sold to the Eckpfeiler Group by way of a contract award resolution. The creditor received the negotiated minimum price; the investor only had to pay the price specified in the bidding guarantee. Moreover, the tenants also quickly recognised the advantage of this development for them: within just a few days of contract being awarded, the new owners launched the initial phase of their renovation programme. After years of insolvency administration, things were on the move again.